2014 Tax Season: 5 Steps to Make Next Year’s Taxes Suck Less
Can you believe it? 2014 is right around the corner. Ha! It’ll be here in no time, I promise. Right after all this cold weather, then hot weather, then cold weather again, it will be 2014. And then your taxes returns will sneak up on you, much like they’re about to this year. Here are a couple tips to make this year THE year you finally get your tax-house in order and make life super simple in 2014.
1) Stop by Walmart, Target, or Office Max and pick up a little notebook for your car. Most people who deduct mileage against their taxes for business and medical purposes do so at their own peril. The IRS requires “contemporaneous” notes regarding your mileage. The old method of “what was my odometer on Jan 1 and Dec 31” isn’t going to work. Remember the “W’s” from elementary school? You need to do the same thing for IRS notes:
- Who you went to see,
- What you saw them for,
- When you went,
- Where you went,
- Why you went,
- and How you got there (and how many miles it was).
Remember, for mileage to count, it has to originate and end at your primary work location, so always start work trips from the office! The key here is execution – every time you start the car, take out your notebook and make a note. Tax documentation solved!
2) Buy a big manila envelopes for medical expenses. Not only may you have to verify expenses for your FSA or HSA, but if you keep track of bills and out-of-pocket costs, you may be able to deduct medical expenses on your Schedule A next year. Again, 5 W’s apply, but the original bills from your medical provider will suffice.
3) Since tax rates are essentially unknown year-to-year (thank you, Congress), the one thing you can’t beat is tax-free income. Take a look at your current investment portfolio – could you do better with some tax-free strategies? There are dozens (or more) of investments that offer tax-free dividends that have long-term track records. Consider moving a portion of your non-qualified investment portfolio into tax-free positions. While you’re at it, open/contribute to a Roth IRA. You’ve been saying, “Someday….” long enough. Today’s the day.
4) If you own a business and have the nasty habit of co-mingling your personal and business monies, make this the year you stop doing that. Open a new business account, get a credit card for business use only and stick to it. Sure, it may be a hassle to transfer money back and forth, but your books will be cleaner at the end.
5) Finally, make this the year you find professional help. Just the other day, I told my wife that if some enterprising individual approached me with the offer to do my bookkeeping part-time, I’d jump at that in a heartbeat. Unless you’re a bookkeeper, that’s not your main business. Get out of the business of bookkeeping. Hire it out, and use that time to be more productive in your own line of work.
All of us detest tax time. Taking a few minutes today to set up 2014 will make your life a bazillion times better this time next year.
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Ugh, are we talking about 2014 already?
Good tips! We started a new bank account for our freelance work and Club Thrifty last year so that we could start this year fresh and that everything could be paid directly to the LLC. It is making things much easier!
Holly@ClubThrifty recently posted..My Escape from Hotel Hell
I just started my LLC this year which makes it even more important to keep separate finances! I opened a business account on Dec 31 so I should be good!
Lance @ Money Life and More recently posted..Bold Move By Discover – The Discover it™ Credit Card
Great tips! We do virtually all of these. We’re about ready to LLC our business, so we’ll be getting a business credit card then. We have a business checking account already so that will just be a natural next step.
John S @ Frugal Rules recently posted..Even More Blogging Tips From a Beginner
I completely agree with hire a bookkeeper. I always say do what you do best and outsource the rest. When I owned my decorating business I had an awesome bookkeeper that would do my work every 3 months because our GST (sales tax) had to be submitted every 3 months. It was so easy to just drop the files off at her house and pick it all up a week later.
Sicorra @TacklingOurDebt recently posted..Blog Planner – Grab Your Free Digital Copy
Last year was the year I decided we needed professional help with taxes. Depreciation schedules, capitalized expenses vs repairs, I wanted no question that the books for our rental duplex were impeccable. It’s expensive, but it’s worth it.
Mrs. Pop @ Planting Our Pennies recently posted..He Said, She Said: Expensive Hobby Or Male Bonding?
I agree. Just for the peace of mind that someone competent is in your corner, it pays for itself.
I DO like the fact that I know taxes and can audit my pro’s work. I used to hate sending tax forms to the government that said a bunch of stuff about me that I didn’t know how to read.
Great tips! It’s crazy how many records you have to keep to make yourself audit-proof…or to satisfy audtiors. Thanksfully I’m an accountant so this kind of stuff comes naturally, but I still think the tax code needs to be changed. Think of all the time essentially wasted complying with tax laws. A simpler code that brings in similar revenue levels would be amazing…too bad I never see that happening.
DC @ Young Adult Money recently posted..10 Things You Can Do to Improve Your Finances in the New Year
Job security for you, DC….
Good advise.
I would add make sure you hire a professional to go over your taxes.
If you get a good accountant they will make your life that much easier. Quickbooks helps also.
Darnell Jackson recently posted..3 ways your blog can exploit the 2013 Oscar Nominations
I made the leap to an LLC last year, and so this will be my first year dealing with specific taxes for it (even though it is disregarded). I made it a point to open a separate PayPal and bank account to keep track of everything and make sure business is business and personal is personal.
The College Investor recently posted..How to Deal with the Capital Gains Tax 2013 Increases
Thanks for the reminder about the mileage. I seem to do a shitty job of this every single year, but since it’s jan there is hope for next year. Also the idea of business expenses on one card. I admit I co-mingle. Ugh, I’m glad I have a good accountant!
Budget and the Beach recently posted..I’m on a Money Diet
Thanks for telling me it’s OK to get a book keeper. I’ve been pulling my hair out trying to sync all the rental income with my contract income with my business. I have an accountant for my practice but I need some book keeping help with my other things. And Joe, taxes always suck, and each year usually gets worse. Nice try, though.
Kim@Eyesonthedollar recently posted..Debt Movement: Get Rid of Debt Payments Once and For All
@AJ I don’t know what legislators think we all do with our time but it’s the same over here! Keeping records has become the main occupation. How are we meant to sped time earning money if we need to be book keepers? Maybe the legislators should be forced to do a proper job (or be properly unemployed) every so many years and jump through all the hoops they ask us to jump through.
John@MoneyPrinciple recently posted..About New Year’s resolutions, saving and wasting
I think that last point is the most essential. If you aren’t in the business of keeping a set of book (online or off) then you are focusing your attention on the wrong area. People need to spend their time doing what brings in the money and not side tasks just to save a few bucks…which can actually end up costing more in the end.
I’m new school, so I say forget the pen, paper, staples, folders, etc. get a scanner and sign up for email docs–never lose anything again. Need to track mileage? Hit the App or Play stores. it’s 2013, isn’t it time to make things easier on yourselves?
Eric J. Nisall – DollarVersity recently posted..TurboTax Reviewed From an Accountant’s View
I’ll use my abacus to see how much those newfangled tools cost, Eric! Great tips from the “seasoned tax pro.” Thanks!